Navigating the Social Security Tax Maze: The 9 States Still Taking a Slice (and What’s Coming in 2026)

For retirees planning their golden years, understanding state-level Social Security taxation is critical. While most states offer exemptions, nine will still tax benefits in 2025, though legislative changes are making some friendlier, with West Virginia completely phasing out its tax by 2026. Savvy investors need to know the varying income thresholds and deductions to optimize their retirement income.

If you’re meticulously planning your retirement, the state you choose to call home can significantly impact your financial well-being. Beyond lifestyle and climate, the intricacies of state tax laws, particularly concerning Social Security benefits, can dictate how much of your hard-earned retirement income you actually keep.

The landscape of Social Security taxation is constantly evolving. While a significant majority of states already offer full exemptions, a core group of nine states will still levy taxes on Social Security benefits in the 2025 tax year. For investors, understanding these nuances and anticipating future changes is key to maximizing retirement income and making informed relocation decisions.

The Nine States That Tax Social Security in 2025

For the 2025 tax year, nine states continue to tax Social Security benefits. However, it’s crucial to note that each state has unique policies, including varying income thresholds and age-based exemptions, that can significantly reduce or even eliminate the tax burden for many retirees. States generally only tax the portion of your Social Security income that is already considered taxable by the federal government.

1. Colorado

Colorado’s flat income tax rate increased to 4.40% for 2025, as confirmed by the Colorado Legislative Council Staff. However, the state offers significant exemptions for Social Security benefits:

• If you are age 65 or older, you can deduct all federally taxed Social Security income from your state taxes.
• If you are ages 55 to 64, you can deduct all federally taxed Social Security income if your adjusted gross income (AGI) is less than $95,000 for married taxpayers filing jointly or $75,000 for single or head of household taxpayers.

For those with higher AGIs in the 55-64 age bracket, a deduction of up to $20,000 in retirement income, including Social Security benefits, is still available. Beyond that, the flat tax rate applies. These rules are anticipated to remain consistent for the 2026 tax year.

2. Connecticut

Connecticut’s state income tax rates range from 3.0% to 6.99% for 2025. Retirees in Connecticut can entirely avoid state taxes on their Social Security benefits if their AGI falls below specific thresholds:

• $100,000 for married taxpayers filing joint returns.
• $75,000 for single or head of household taxpayers.

If income exceeds these limits, a partial exemption applies, ensuring that no more than 25% of your received benefits is subject to state income tax. These rules are expected to hold steady for the 2026 tax year, providing predictability for retirees.

3. Minnesota

Minnesota’s income tax rates range from 5.35% to 9.85%. The state provides a deduction for Social Security benefits based on AGI, allowing many to deduct all of their Social Security benefits if their income is below:

• $108,320 for married taxpayers filing joint returns.
• $84,490 for single or head of household taxpayers.
• $54,160 for married taxpayers filing separately.

The deduction is phased out by 10% for every $4,000 of AGI over these thresholds for most filers. For married filing separately, the phaseout is 10% for each $2,000 over $50,000. These thresholds are adjusted periodically, and investors should monitor official state tax resources for potential updates in 2026.

4. Montana

Montana’s attempts to repeal its state tax on Social Security benefits failed in 2024, meaning retirees face a 5.9% state tax on all income over $42,200 (or $21,200 for single filers) for 2025, including Social Security. However, residents over age 65 can take a standard $5,660 deduction from their federal taxable income.

This $5,660 deduction for seniors is expected to continue for 2026, though no further legislative changes to eliminate the tax have been announced. Investors should factor Montana’s higher taxation into retirement income projections.

5. New Mexico

New Mexico significantly increased its income thresholds for Social Security tax exemptions in 2022. For the 2025 tax year, your Social Security income isn’t taxed if your income falls below:

• $75,000 for married couples filing separately.
• $100,000 for single or head of household taxpayers.
• $150,000 for married couples filing jointly.

These generous thresholds exempt most lower- and middle-income retirees from state Social Security taxes, a policy expected to remain in place for 2026. This stability offers a predictable tax environment for retirees in the state.

6. Rhode Island

Rhode Island exempts Social Security benefits from its state tax in 2025 for retirees at or above the full retirement age (currently 67) whose AGI falls below:

• $130,250 for married couples filing jointly.
• $104,200 for single or head of household taxpayers.
• $104,225 for married couples filing separately.

These thresholds are adjusted annually for inflation, meaning investors can expect slight increases to the AGI limits for 2026. This dynamic policy requires retirees to stay informed about yearly adjustments to maximize their exemptions.

7. Utah

Despite Governor Spencer Cox’s 2024 proposal to eliminate Social Security taxes, Utah retirees exceeding specific AGI thresholds will still pay income tax on benefits at the state’s flat rate of 4.5% for 2025. These thresholds are:

• $90,000 for head of household or joint filers.
• $54,000 for single filers.
• $45,000 for married couples filing separately.

Utah offers tax credits to offset this. Seniors born in or before 1952 may qualify for a retirement credit of up to $450 using the Retirement Credit worksheet. Alternatively, if age requirements aren’t met, a tax deduction for Social Security, disability, or survivor benefits may be available via the Social Security Credit worksheet. Retirees can only qualify for one credit. These rules, including the 4.5% flat tax and credits, are expected to remain stable for 2026.

8. Vermont

Vermont’s state income tax ranges from 3.35% to 8.75%. However, a bipartisan bill passed in June retroactively raised income thresholds for Social Security exemptions for the 2025 tax year:

• Married couples filing jointly can fully deduct Social Security benefits if their income does not exceed $70,000.
• All other senior taxpayers can fully deduct Social Security benefits if their income does not exceed $55,000.

Partial exemptions apply for incomes between $70,000 and $80,000 for joint filers, and $55,000 to $65,000 for single filers. While some legislators have proposed further phase-outs, Vermont’s new income thresholds are set to continue for 2026.

9. West Virginia

West Virginia is actively phasing out its state income tax on Social Security benefits, a result of a new law passed in March 2024. This provides a clear roadmap for retirees:

• For the 2024 tax year, 35% of Social Security benefits included in federal AGI were deductible.
• For the 2025 tax year, this deduction jumps to 65% of benefits.
• For the 2026 tax year, a full 100% of Social Security benefits will be deductible, effectively eliminating the state tax.

This progressive phase-out makes West Virginia an increasingly tax-friendly state for retirees and represents a significant legislative shift for retirement planning.

States That Don’t Tax Social Security for 2025

While the focus is often on the states that do tax Social Security, it’s important for investors to remember that the vast majority do not. This includes states with no state income tax at all, as well as those that have a state income tax but specifically exempt Social Security benefits.

9 States with No State Income Tax

These states offer a significant advantage for retirees as they impose no state income tax whatsoever, simplifying financial planning:

• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

32 States with State Income Tax That Do Not Tax Social Security Benefits

Many states with an income tax consciously choose to exempt Social Security benefits, providing relief for retirees. This list also includes Washington, D.C.:

• Alabama
• Arizona
• Arkansas
• California
• Delaware
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Mississippi
• Missouri
• Nebraska
• New Jersey
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• Virginia
• Wisconsin
• Washington, D.C.

Does the Federal Government Tax Social Security Benefits?

Yes, regardless of your state of residence, the federal government may tax a portion of your Social Security benefits. Federal taxation began in the 1984 tax year, with current thresholds and rates established in 1993. Unlike state laws, these federal guidelines have remained consistent for decades.

The amount subject to federal tax depends on your filing status and “combined income,” which is calculated as your adjusted gross income, any non-taxable interest, plus 50% of your Social Security benefits. Understanding these thresholds is critical for all retirees:

Federal Taxation Thresholds

• If married, filing jointly:
  • 85% of Social Security benefits taxed for combined incomes higher than $44,000.
  • 50% of benefits taxed for combined incomes between $32,000 and $44,000.
  • Benefits exempt from taxes for combined incomes lower than $32,000.
• All other taxpayers:
  • 85% of Social Security benefits taxed for combined incomes higher than $34,000.
  • 50% of benefits taxed for combined incomes between $25,000 and $34,000.
  • Benefits exempt from taxes for combined incomes lower than $25,000.

Strategic Tips to Minimize Your Tax Burden in Retirement

For savvy investors and future retirees, proactive tax planning is paramount. Here are key strategies to consider throughout your working years and into retirement to help minimize your overall tax bill:

1. Keep Your Tax Bracket Low: Your retirement withdrawals are taxed as income. Maintaining a lower overall income helps keep you in a lower tax bracket, reducing the tax rate on your withdrawals and potentially keeping you below federal and state Social Security thresholds.
2. Strategic Retirement Withdrawals: While Required Minimum Distributions (RMDs) from most retirement accounts begin at age 73 (including from 401(k)s), consider taking smaller, elective distributions in your 60s. This can spread the tax burden over more years, potentially keeping your income in a lower tax bracket during peak withdrawal years. Evaluate the tax savings against potential lost interest earnings.
3. Convert Investments When Taxes are Low: If you anticipate a year with lower income or favorable tax rates, converting pre-tax IRAs to Roth IRAs can be a powerful move. Roth IRA withdrawals in retirement are tax-free, shifting the tax hit to your working years when your marginal rate might be lower.
4. Diversify with Tax-Free Bonds: Consider investing in federal, state, or municipal bonds. These are generally considered low-risk and can offer tax-exempt interest income at the state and sometimes federal level, depending on the bond type and your residence. However, remember that interest on municipal bonds is typically included in your federal AGI for Social Security taxation calculations.
5. Avoid Penalties: Understand and adhere to all tax regulations, especially those regarding Required Minimum Distributions (RMDs). Failing to meet your RMD can incur a hefty 25% penalty on the under-distributed amount, in addition to the regular income tax. Consult a tax professional to ensure compliance and explore personalized strategies.
6. Seek Expert Guidance: The complexities of retirement income and taxation warrant professional advice. A qualified financial advisor or tax professional specializing in retirement planning can help you develop tax strategies tailored to your specific benefits, savings, and lifestyle, ensuring you’re paying only what you owe and avoiding costly mistakes.